“Romanian oil refining and marketing firm The Rompetrol Group N.V. (TRG) has completed its upgrade of the Petromidia refinery with support from its parent, KazMunayGas,” the rating agency said in a statement. “We think this support will continue.”
S&P also affirmed its ‘B’ long-term corporate credit rating on Rompetrol.
The agency said its outlook revision reflected estimations that Rompetrol’s production volumes and yield would rise following the upgrade of its Petromidia refinery.
“Over a full year of operations, we understand that the upgrade could increase production by 20%-25%, equal to about an extra million tons (mostly diesel) a year,” the statement noted.
S&P estimates Rompetrol’s funding needs will likely decline in the next year as recent negative free cash flow improves thanks to lower capital investments and increased production at the upgraded Petromidia refinery.
Free cash flow will also improve thanks to the currently strong refining margins for refineries in the Mediterranean basin, it noted.
Rompetrol, Romania’s second largest oil group, announced in September it has completed a six-year upgrading process at its Petromidia refinery that will increase processing capabilities to 5 million tons of raw materials, from 3.5 million tons previously.
Total investments in the project exceeded $380 million.
The agency said Rompetrol’s ratings could come under downside pressure if the group increases capital investment and Europe experiences a severe recession. However, such a scenario is not very likely, S&P said.